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Retailers say ‘Enough Already!' Set sights on rebound in 2008

It looks like floor covering retailers have heard enough about slumping market conditions.

Their expectation for the coming year is an industry-wide rebound that will be most visible in the hardwood and ceramic tile categories. Although NFT’s year-end poll of more than 400 retailers identified the economy as the biggest factor determining the industry’s future, the survey results suggest it won’t be the only factor. Respondents listed their top areas of investment as marketing followed by showroom design, technology and training.

Our
exclusive survey of more than 400 retailers finds wide spread optimism for the
coming year. Many say they are set to invest in marketing and showroom design
to draw shoppers.

It looks like floor covering
retailers have heard enough about slumping market conditions.

Their
expectation for the coming year is an industry-wide rebound that will be most
visible in the hardwood and ceramic tile categories. Although NFT’s
year-end poll of more than 400 retailers identified the economy as the biggest
factor determining the industry’s future, the survey results suggest it won’t
be the only factor. Respondents listed their top areas of investment as
marketing followed by showroom design, technology and training.

The decision to bankroll ad campaigns and other tools aimed at
driving consumer traffic is a clear sign that flooring retailers will not sit
back in 2008 and wait for better times. This proactive approach appears to be
fueling a sense of optimism. On the heels of a year that saw a sizeable dip in
business driven by new construction, 51% of those polled anticipate an overall
increase in their sales volume in the coming year while 36% said they expect it
will be flat. (About 13% said they were bracing for a year-to-year decline in
their volume.)

If expectations for the coming
year pan out it will be a marked improvement over the performance of floor covering
retailers last year. Looking at the big picture, retailers see 2007 as a year
they’d just as soon forget. A clear majority-more then 63 %-said the business
conditions for the flooring industry grew worse over the past year. Nearly 35%
of those polled said their operation witnessed a falloff last year while 22%
said sales were flat. (About 44% said their sales increased from 2006.) The
steepest declines last year were seen in the carpet and vinyl/resilient
segment. About 45% of those participating in the study said they saw sales fall
in either or both of those product areas last year.

The results leave no doubt that consumer flooring sales were
hurt significantly in 2007 by a sputtering real estate market. A majority of
those polled (52%) said they saw a drop in business from builders and new
construction. Of those, more than half described their involvement in the
segment last year as “greatly decreased.” While the industry has always been
dependent on the housing market to fuel demand, the study indicates that
retailers looked to commercial business and resident replacement to offset
losses from the housing slump. More than 41% of the respondents said they saw
an increase in contract commercial business. Separately, one-third of the
retailers said they generated more Main Street commercial customers last year.

Overall, the residential
replacement segment-which is also closely linked to real estate sales-seemed
particularly volatile. While about 24%
of the participants said they saw a drop, more that 45% said they enjoyed an
increase. Just over 30% said they saw no appreciable variation from year to
year.

On the product side, hardwood and ceramic tile played a
starring role for retailers last year. A majority of those polled said they saw
increases in one or both categories last year-well beyond the percentage that
reported gains in other product areas. Similar results are expected in 2008 as
there was more optimism for tile and stone sales than all other individual
flooring areas.

Similarly, the product segments
that saw the biggest falloff last year-carpet and vinyl/resilient-are seen as
vulnerable this year as well. About 44% of those surveyed said their carpet
and/or resilient sales were down in 2007. Asked about their expectations for
this year, 18% said carpet sales will be down while more than 26% said they
expect sales in vinyl/resilient to slip.

Overall the survey suggests that retailers are more optimistic
about their individual prospects than the industry as a whole. While a majority
of the respondents predicted that their sales would improve, the percentage of
respondents who said that overall business conditions would improve was about
27%.

Looking for answers,
retailers add a wide range of products

The
effort to jump start sales last year prompted a sizeable portion of retailers
to try something new, our survey found. Nearly 40% of respondents reported that
they added at least one new product category over the past 12 months. Still,
the survey shows that retailers embraced a variety of approaches.

The two
categories most frequently mentioned were cork flooring and products that fall
under the heading “Green.” Also topping the list were such emerging product
areas as bamboo and granite countertops. Large format tiles, which continue to
gain popularity, were also mentioned. Even so, the list of categories added
last year was notable for its length. The more than 400 retailers participating
furnished nearly 90 unique answers when asked to detail any categories they
started offering.

About the Survey: The preceding is a
snapshot of a new study examining the flooring industry. The conclusions are
based on the opinions, preferences and purchasing behavior of retailers and
contractors in the U.S. flooring covering business who agreed to participate in
the survey. The survey was conducted and the findings were compiled by Clear
Seas Research, a division of BNP Media. The study was mailed in late 2007 to
2,250 flooring retailers and contractors. Those targeted were qualified
subscribers to National Floor Trends (NFT) who report sales
in excess of $500,000. A total of 411 survey questionnaires were completed and
returned for a response rate of 20%.
For more information: The full and complete survey is available from
Clear Seas. For information about ordering or to find out more about Clear Seas
research services contact Beth McGuffin at McGuffin@bnpmedia.com.

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